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July 29, 2021
Do you ever wonder how your 401(k) plan stacks up against the best plans in the country? Does your company offer a plan that can attract and retain the best people?
There are two different types of benchmarking: comparative and aspirational.
Comparative benchmarking is simply comparing your plan against similar plans based on commonalities like plan size or industry. This is helpful when you want to make sure plan features like the company match and fund expenses are competitive relative to your peer set. In today’s labor market, this is increasingly important for recruiting and retaining top talent.
Aspirational benchmarking, on the other hand, operates from first principles, comparing your plan against an ideal rooted in the idea of promoting retirement readiness for all employees and reducing risk for the employer.
By looking at a plan across these five critical areas of plan success, we create a numerical score that enables plan sponsors to understand where they are right now, prioritize and focus on specific dimensions of their plans, and track progress over time. By definition, Blue Ribbon plans put most employees on track toward a secure retirement while simultaneously minimizing risk for the plan sponsor.
As a real-life example, Cerity Partners Retirement Plan Advisors was recently retained by a Florida-based law firm to evaluate their plan and make recommendations regarding best practices. After a thorough examination, we advised that the plan streamline its investment lineup, improve its plan design, and strengthen its fiduciary governance process, all helping to reduce overall costs. At the time, the firm’s plan had roughly $52 million in plan assets and 200 participants. After implementing our changes around strategic plan design, we also conducted a recordkeeper RFP which lowered fees. The client also accepted our recommendations to streamline the investment lineup and overhaul their fiduciary governance program, helping improve participant savings rates and mitigate risk to the firm.
In the end, our plan health consulting approach assisted our new client in reducing investment costs by 45%, recordkeeping costs by 50%, and advisory fees by 50%. In addition, working closely with the client’s employees, we increased the savings rate by 31%.
The net effect of these changes was that the client was able to increase their overall Plan Health Score™ from 50 to 85 in less than a year, making it a “Blue Ribbon Plan.”
To learn how we can do the same for your plan, let us conduct a Plan Health ScoreCard report for your organization.
Please read important disclosures here.
Paul is a Partner in the firm’s Retirement Plan Services Group. He has more than fifteen years of experience in the retirement plan industry and...
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